How was this 2005 AAA case different from today's case, or frankly, any case filed after the 2013 version of the AAA Commercial Rules? Those 2013 rules, specifically, R-34, were the first iteration of a rule expressly authorizing the filing of dispositive motions. Until then, lawyers resisting summary judgment relied, as I then did, upon Section 10 (a) of the Federal Arbitration Act which provided then and now that "..an order vacating the award [may be entered] ... where the arbitrators were guilty of misconduct ... in refusing to hear evidence pertinent and material to the controversy.” My argument to Judge Cahn, who chaired the panel, was that summary judgment had the effect of foreclosing my client from putting in "evidence pertinent and material to the hearing," was not permitted under AAA Rules and would constitute a basis for vacating any award. In 2005, the applicable AAA Commercial Rules were silent as to dispositive motions and directed, in R-30, that "the claimant shall present evidence to support its claim," although allowing that "the arbitrator has the discretion to vary this procedure, provided that the parties are treated with equality and that each party has the right to be heard and is given a fair opportunity to present its case.”
So that’s what happened to me 20 years ago. I had frankly forgotten about the case until a few years ago when I picked up an article written in 2011 by Edna Sussman and Solomon Ebere on the use of dispositive motions in, “NYSBA New York Dispute Resolution Lawyer, Spring 2011, Vol. 4, No. 1.
On the article’s first page, under a bold heading “The Arbitrator’s Authority,” was a block quote that read, “Granting summary judgment surely falls with this standard [of broad discretion to the arbitrator] and fundamental fairness is not implicated by an arbitration panel’s decision to forego an evidentiary hearing because of its conclusion that there were no genuine issues of material fact in dispute.”
To my surprise, the language came from the Third Circuit's rejection of my then-former client's appeal of the District Court's decision not to set aside the arbitration award that I had lost in 2005. Sherrock v. DaimlerChrysler, 260 F. App'x 497, 502 (3d. Cir. 2008). I didn't recognize the language because somewhere after the panel's grant of summary disposition against my client and the District Court's entry of judgment on the award, I was fired, or quit, or recommended that the client not appeal the entry of judgment. What happened may have been all three; suffice it to say, I wasn't involved in any of the extensive proceedings after the panel's final award.
What I do recall is the very long oral argument to the panel on Chrysler's motion for summary judgment. There's no question that I had full opportunity to sway the panel's decision but in the face of a legal defense and undisputed facts, I lost 2 -1. Notwithstanding my seat on the sideline after the panel found against my client, the lesson of the case came back to me immediately upon reading Edna and Solomon's 2011 article - arbitration does not necessarily guarantee every case an evidentiary hearing regardless of what R-30 provides and the then-absence of express allowance of dispositive motion practice. If there's a complete legal defense to the claim (think res judicata, the defense in my client's case), you may well lose, whether it be on summary disposition or after an evidentiary hearing. Arbitration is not like state court where dispositive motions are rarely granted (and sometimes not even heard) and everything is left to the jury. Another important thing to keep in mind — in 2005, when I argued against summary disposition, and in 2008, when the Third Circuit upheld the panel's dismissal of my client's claim without evidentiary hearing, and indeed until 2013, AAA Commercial Arbitration Rules did not make provision for dispositive motions. Yes, it was not until 2013 that AAA Commercial R-34 appeared and provided:
R-34. Dispositive Motions:
(a) The arbitrator may allow the filing of and make rulings upon a dispositive motion only if the arbitrator determines the moving party has shown that the motion is likely to succeed and to dispose of or narrow the issues in the case.
(b) Consistent with the goal of achieving an efficient and economical resolution of the dispute, the arbitrator shall consider the time and cost associated with the briefing of a dispositive motion in deciding whether to allow any such fees, expenses and compensation associated with a motion or application to make a motion may be assessed as provide for in Rule R-49(c).
So what did I learn from all this ancient history that helps me in my role as an arbitrator of commercial disputes today? Frankly, as an advocate, at that time I regarded arbitration as just another forum and another set of rules to follow. It took some years as counsel in arbitration matters, and winning and losing before leading arbitrators, for me to learn the significance and importance of the foundation that arbitration rests upon - efficiency, economy and finality with a big dose of party autonomy — and how that foundation supports the need and value of dispositive motions in arbitrated proceedings.
Many say that the most valuable way to learn is by doing ("Change is the end result of all true learning," Leo Buscalglia) or by teaching ('Those who know, do. Those that understand, teach," Aristotle). And that's how I learned. Since 2012, I have taught dispute resolution at Boston University School of Law to hundreds of international lawyers and law students eager to earn a degree in American Law that they can take back to their home countries or use as a stepping-stone to bar admission in the United States. For many of them, alternative dispute resolution is a new concept. The more I learn about arbitration for them, the more I learn about arbitration for myself. And I'd say that the most important lesson I learned is about party autonomy and its role in arbitration. Of course, if one doesn't agree to arbitration (absent some other issues that may occasionally come up to bind non-signatories), generally litigation is the default dispute resolution path once negotiation fails or is on hold. But it's fair to say that delay is the only result of which a disputant is assured in litigation — serious delay from a system of public adjudication that is overwhelmed. As a result, a desire for prompt resolution is what drives many commercial disputants to arbitration.
That's where the choice of arbitration in a contract, usually long before a dispute arises, has its biggest impact. Months and not years is the expected time frame of a fully arbitrated dispute - from claim filing through final award. By choosing arbitration, parties have expressed their strong interest in and preference for efficient and cost-effective resolution of disputes that fall within the scope of their agreement to arbitrate. Arbitrators must honor that goal; it's what the parties want. Litigators accustomed to turning over every rock in the discovery garden may not like their clients' choice, but they are only looking for trouble from the arbitrator if they try to turn arbitration into litigation.
Furthermore, for a client who bought into arbitration because of the promise of an efficient and final resolution, a surprise litigation budget covering 2+ years of contested proceedings and full-blown discovery instead of an eight to ten months march to a final award may prompt a client to have a difficult and unwelcome (by counsel) conversation with counsel.
Getting back to where this article began, it's hard, if not impossible, to honor arbitration's goals — efficiency, economy, finality with party autonomy — if arbitration as a process does not make room for dispositive motions in the right circumstances. That's exactly what R-34 does. And no one had to wait for the 2013 publication of R-34 to reach the conclusion that in the right circumstances, arbitration as a process needs the potential for a dispositive motion. And that's what Judge Cahn knew in 2005 and what Edna Sussman and Solomon Ebere knew in 2011, and what the rule writers for the AAA embraced in 2013, and what it took me 20 years after losing Sherrock v Daimler-Chrysler to learn.
